When IBM decided to become the leader in the way companies manage documents, it approached rival FileNet Corp. in Costa Mesa and offered $1.6 billion.

FileNet said yes on Thursday. But not without assurances that IBM would preserve the brand and employees of the longtime Orange County company, said Ted Smith, FileNet’s retired founder and current board member.

“So many entrepreneurs in Orange County build great companies. They’re acquired, then dismantled and disappear. It affects the employees, and it affects the county’s industrial base,” Smith said. “I’m very happy that this is not happening with FileNet.”

IBM offered jobs to all 1,800 FileNet employees. The operation will join IBM’s information management division, which is led by Ambuj Goyal. Lee Roberts, FileNet’s chairman and chief executive, will report to Goyal.

“We didn’t do this because we felt we had to, but strategically, it was the right thing to do,” Roberts said.

After the sale, expected to wrap up in October, FileNet will have access to IBM employees and customers all over the world.

“I have four people in China, and IBM has thousands. Overnight, I’ll be able to get into China. You start to think about the leverage that IBM has with its 140,000-person consulting business,” Roberts said.

IBM, which employs 1,300 people in Orange County, offered FileNet shareholders $35 per share, a slight premium over FileNet’s previous close of $34.65. After the announcement, FileNet shares rose 4.4 percent, or $1.52, to close at $36.17 on Thursday, as some speculated that IBM may raise its price or another bidder might emerge.

Roberts said stock price is a poor metric to use when setting the acquisition price. Nevertheless, FileNet’s shares have traded on average around $27 until a few weeks ago. Landing on lists as a prime acquisition target is a likely reason for the recent run up, he said.

FileNet, which had $422 million in revenues last year, will continue to be part of Orange County, keeping its facilities, product line and brand name.

“I view the acquisition as being an affirmation of FileNet being an innovator,” said Tim Jemal, executive director of the Orange County AEA council. “There is a definite benefit to Orange County for a company of IBM’s stature to acquire a local company like FileNet.”

Jemal sees the acquisition as a stamp of approval, bringing the consistently high performance of FileNet into the limelight.

FileNet was an innovator in creating software to digitally manage legal documents, tax forms, expense reports and other files. The company expanded the business to help people monitor and track files

The overall market has grown considerably since Smith founded FileNet in 1982. With IBM and EMC Corp. jumping in, the industry had $1.2 billion in revenues last year, according to Forrester Research, a market research firm. The market is projected to grow to $2.7 billion by 2009.

While FileNet and IBM overlap in many areas, the merger may be more strategic than it appears, said Connie Moore of Forrester.

“IBM and FileNet have been head-to-head competitors, so, at first blush, it seems kind of confusing. Did they just want to take out a competitor? What are they up to?” Moore said.

But FileNet does something better than IBM: It offers software to help people do their jobs instead of replacing them, she said.

“That is where IBM is lacking. It has no human-centric product,” Moore said. “The market is projected to grow to $2.7 billion by 2009 and growth is roughly split between human and non-human. It’s not good for IBM to have a hole in the market, and that’s where FileNet comes in.”

The acquisition will give IBM 18.3 percent of the market, elevating it above current leader EMC, at 11.3 percent, said Melissa Webster, an analyst with market researcher International Data Corp. FileNet is the No. 2 player in the market.

“Typically some of the steam comes out of growth after a merger,” Webster said, “but FileNet and IBM have a lot of commonality, so the integration won’t be too painful.”